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Cascador, a platform supporting growth-stage founders, and Sterling Bank have launched a $200 million fund designed to expand access to bank loans for Nigerian startups and small businesses by sharing the risk of borrower defaults. The SME Credit Backstop Fund aims to support up to $1 billion in lending capacity, addressing a persistent financing challenge for businesses seeking to scale.
Rather than lending directly to businesses, the fund will guarantee a portion of lenders’ potential losses if borrowers default. The arrangement is intended to encourage banks to extend credit to companies they might otherwise consider too risky.
The SME Credit Backstop Fund will consider businesses nominated by venture capital firms and startup studios that already support them. Using AI-powered underwriting, the fund will assess whether each business is ready to take on debt before deciding whether to provide a guarantee.
If a business is approved, the fund will agree to cover part of the bank’s loss if the loan becomes unrecoverable. Sterling Bank will retain responsibility for its own lending decision, including conducting due diligence, disbursing approved loans, collecting repayments and pursuing borrowers who default.
The backstop is designed to reduce the bank’s exposure to potential losses, rather than eliminate the risk of lending.
“By sharing risk with lenders and translating community trust into a bankable signal to lend, the fund can help more businesses access what they need to scale and create jobs,” said Cascador chief executive Trish Thomas in a statement shared with TechCabal.
Sterling Bank Group Executive Obinna Ukachukwu said the combination of risk-sharing and recommendations from investors familiar with the businesses would give the bank “greater confidence to provide larger, longer-term loans.”
Fund targets Nigeria’s persistent SME credit gap
Limited access to debt remains a significant obstacle for Nigerian startups and small businesses, many of which struggle to meet banks’ collateral requirements or satisfy conventional lending criteria.
World Bank Enterprise Survey data cited in the report indicate that about one in five Nigerian businesses had a bank loan or line of credit in 2025, compared with 22% across sub-Saharan Africa and 36% globally.
The fund seeks to address this gap by enabling lenders to share the risks associated with financing businesses that have existing investors and revenue-generating operations. Its approach uses the knowledge and relationships of venture capital firms and startup studios to help identify businesses that may be suitable for debt financing.
Borrowers will initially be able to access local-currency loans worth up to $250,000, with plans to increase the maximum to $1 million.
The partners expect to raise the fund’s backstop capital from philanthropic organisations, impact investors and development finance institutions. The stated $200 million represents the fund’s target size, while the $1 billion figure reflects the lending capacity it aims to support.
Startup debt gains importance as equity funding tightens
The initiative comes as African startups increasingly turn to debt to finance expansion amid tighter venture capital conditions. Without access to loans, businesses may have to raise additional equity, surrendering ownership stakes, or slow their growth.
Only 190 African startups raised at least $100,000 in the first half of 2026, according to figures cited by TechCabal, marking the lowest number since at least 2021.
Meanwhile, debt has become a more prominent component of African technology funding, although access remains concentrated among a relatively small number of companies.
African startups borrowed a record $1.64 billion in 2025, with debt accounting for 41% of total funding, up from 17% in 2019, according to Partech’s Africa Tech VC report. TechCabal Insights tracked a further $614 million in startup debt during the first half of 2026, representing approximately 43% of funding over the period.
Over five years, 169 African startups announced debt deals, compared with nearly 1,900 that raised equity, according to figures cited in the report.
The funding imbalance highlights the potential role of credit-guarantee structures in helping more businesses access debt without relying exclusively on equity investment.
“The future cannot be sustainably built on one layer of the capital stack,” said Iyinoluwa Aboyeji, founding partner of Future Africa. “Equity must work with debt and long-term securities to provide builders with the capital they need to build the future.”
New fund expands Cascador and Sterling’s lending model
The SME Credit Backstop builds on an earlier financing partnership between Cascador and Sterling Bank. In 2025, the organisations partnered on a $2 million catalytic fund that provided debt to Cascador alumni at interest rates of around 20%, with substantially lower collateral requirements.
At its June 2026 Pitch Day, the earlier initiative distributed more than $5 million in funding, including a ₦2.5 billion debt facility, valued at approximately $1.7 million, for agritech startup Agriarche.
The new fund expands the model beyond Cascador’s alumni. While the earlier arrangement relied on Cascador to nominate and guarantee borrowers and Sterling to provide the loans, the SME Credit Backstop will also accept nominations from other venture capital firms and startup studios.
This broader eligibility is intended to extend the risk-sharing model to businesses beyond Cascador’s existing network.
Riverwell platform to manage fund operations
The fund will operate through Riverwell Platform Holding Limited, a UK-owned company, and Riverwell Platform Services Nigeria, its Nigerian operating company.
The Nigerian entity will coordinate partnerships, assess borrowers, collect data and monitor the loan portfolio. A separate reserve company will hold the capital used to backstop eligible loans.
Ukachukwu will serve as a director on the Riverwell platform.
By combining AI-supported underwriting, investor referrals and partial credit guarantees, Cascador and Sterling Bank aim to broaden access to formal debt financing for Nigerian businesses. The fund’s impact will depend on its ability to mobilise the planned capital, support lending at scale and manage the risks associated with extending credit to growing companies.
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